Day 5, Profit after a hard day

The 5^th day was a positive day. It was the first day in which the algo was triggered in Euro FX future, known as 6E in CME. Until this moment, the algo was executing orders only in the British Pound futures. Let’s have a look at both instruments:

Euro FX

The algo performed very well showing its real purpose. It entered long in a retracement and luckily after that, the Euro went up. It was a very directional day.

6E 06/20 

 

As you can see there were only 2 moments in the day in which the position was losing money.

Orders 6E 06/20

The final profit was $1657.50. 

British Pound

As I said before this currency cross has been recently quite volatile in comparison with the Euro/USD. I believe that the news has a bigger impact on this instrument.

6B 06/20

I was looking at the different parameters when the notification popped up on my screen. At that moment, I had a feeling that this trade couldn’t end up in profit. I saw the P&L falling continuously for an hour. After that, the price went up to the point in which I entered. I felt a little relieved but I knew that it won’t last. It dropped again making a double bottom. Even if I don’t believe or follow the charts, I had a little belief that maybe the price will go up again breaking the confirmation line. I was right. The price went from 1.2292 to 1.2395. As soon as the US trading session started, the USD raised versus other currencies. This pair plunged to 1.2303 from the maximum of the day. I believe that after a big movement the prices always revert to their mean but we need to be careful in the current situation. I was lucky because the price recovered more or less 60% of the last downside movement and at that time, my algo closed the position making a small profit.

Trade 6B 06/20

As you can see the MAE shows that at 1 point I was losing more than $1400. We can also see a big MFE showing almost $1800, that was reached after the double bottom. Sadly, as you know, even if it’s not real money, the final profit was far from the MFE. This is why the End Trading Drawdown shows up as $1373.75 the difference between the maximum favorable excursion and the final profit.

Final Profit

The final result was $2127.50. I was happy to have this profit after the losses from the previous week.

Thanks for reading this post. 

FANG Stocks, tech portfolio

Everyone knows about the FANG stocks rally. But what does FANG mean? It’s a group of technology stocks, Facebook, Amazon, Netflix, and Google. If we look back to the beginning of 2015, we would regret not having invested in these stocks. Please bear in mind that it’s my first article using Python, so it can seem a little bit simple.

Stocks summary

Facebook

       Facebook stock, own elaboration with python and Quandl

Facebook is the biggest social network. It enables users to share opinions, ideas, photos, videos, and other activities online. It´s involved in the development of social media applications for people to connect through electronic devices. Its products include Facebook, Instagram, Messenger, WhatsApp, and Oculus. The revenue comes mainly from advertising.

Amazon

         Amazon stock, own elaboration with python and Quandl

It´s engaged in the provision of online retail shopping services  The efficiency of its distribution centers makes difficult to compete with Amazon. In addition, they have Amazon Web that it’s focused on the global sales of computing, storage, database, and AWS service offerings for start-ups, enterprises, government agencies, and academic institutions.

Netflix

        Netflix stock, own elaboration with python and Quandl

This company provides subscription service streaming movies and TV episodes over the Internet and sending DVDs by mail. Netflix obtains content from various studios and other content providers through fixed-fee licenses, revenue sharing agreements and direct purchases.

Google

        Google stock, own elaboration with python and Quandl

Alphabet operates as a holding company with interests in software, health care, transportation and other technologies. It operates through 2 segments: Google and Other Bets segments. The first one includes the following services: Search, Ads, Commerce, Maps, YouTube, Apps, Cloud, Android, Chrome, Google Play as well as hardware products, such as Chromecast, Chromebooks, and Nexus. The other one includes: as Access or Google Fiber, Calico, Nest, Verily, GV, Google Capital, X, and other initiatives.

Individual Stocks

At this point, I believe that you have your own preferences but let´s imagine that we are in 2015. Wouldn’t be better to create a portfolio with all of them?  Also, it´s another way to diversify our portfolio

    Log returns own elaboration using python

We can see how the individual stocks performed in the period. As you can see Netflix has been the more volatile. 

                                                                 Arithmetic Returns of the individual stocks

Google was the worst performer but it doubled in value. I would like to remind you that the Nasdaq index has returned 63% since 2015.

Before we put together all these stocks, let´s check the individual distributions:

             Log return distributions own elaboration

All of them have in common that the extreme observations are positive, which explains in part the reason of the rise in these stocks.

The Portfolio

After reviewing these companies and considering that they have different business units, we decide to create a portfolio. In order to make it simple, we can assign the same weight for each stock, in this case 25% of the initial capital. 

     Portfolio statistics and log returns distribution own elaboration

Considering the long run and this portfolio´ strategy (buy and hold), it´s easy to think that the majority of the daily returns are bigger than zero. This is confirmed by the chart above.

Is it safe to build a portfolio like we have done?  No, some of the reasons are that it´s not properly diversified and the correlation between the assets is positive. Luckily the companies have diversified some of their activities and they are heavily investing in technology which will bring revenue in the future. 
The portfolio return has been 104%.

                                                            Portfolio return own elaboration

Now it's the time to check the risk:

    Portfolio drawdown history, own elaboration

One of my favourites risk metrics is the drawdown. I created this chart showing the portfolio drawdown over the time. The maximum drawdown was 14.10%. This figure surprised me but the main concern is that the stock market raised on a daily basis

Sum up

I hope you like it. We have seen how the main tech portfolio has behaved since 2015. I wouldn’t invest in this kind of portfolio for the reasons mentioned above. In addition, I think that the index rally has been supported by an accommodative monetary policy. Using Python and Quandl has been great and I hope to bring more content in the future. Thanks.

Have a good trading!!

Disclaimer

I wrote this article myself, and it expresses my own opinions that shouldn't be used as a trading advice. Trading carries considerable risk due to the high leverage involved

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